Investment markets started the year on a positive note, Prime Minister Gillard flagged further changes to superannuation and (in an unprecedented move) the Federal Election date was set....... over seven months away!
The All Ordinaries index closed January up 5.1% at 4,901.0 points. As a result, the All Ordinaries index has now gained in excess of 18% for the financial year-to-date.
Global shares were equally supported in January with the Dow Jones Index gaining 5.8%, the FTSE gaining 6.4%, the Nikkei 225 gaining 7.2% and the Hang Seng gaining 4.7% for the month.
Given the strong January share market performance, my forecast from in last month’s newsletter for the Australian share market to increase by 3% to 6% for the 2013 calendar year is now looking somewhat conservative.
While share markets have experienced a remarkable turnaround in recent months, due to the cyclical nature of investment markets, it is reasonable to expect some profit-taking in the near future.
In concerning superannuation news, Prime Minister Gillard flagged in a speech on the 30th of January that superannuation tax concessions on high income earners will be reviewed in the May Budget. Exactly what this will entail in anyone’s guess and we shouldn’t be alarmed until details are released.
Nevertheless, any changes to superannuation tax arrangements in the May Budget will mean the Rudd/Gillard Government has altered the superannuation settings in virtually every year since it has been in power.
While changes to the tax treatment of superannuation may provide some cosmetic enhancement to the expected budget deficit, it is important to ensure that this is not at the expense of greater social welfare into the future.
Prime Minister Gillard also announced the date for the 2013 Federal Election, being 14 September. It is unprecedented for a Prime Minister to announce the Federal Election date so far in advance.
Conspiracy theories are circling that the election announcement had something to do with the impending arrest of the MP Craig Thompson. In any event, I am not sure how many Australians can stomach a seven month election campaign!
The RBA board didn’t meet in January and are due to meet next Tuesday the 5th of February. It is widely expected that the RBA board will keep rates on hold. If the RBA does surprise the market and cut rates, expect the Australian Dollar to fall.
The Australian Dollar was steady in January and is currently buying US104.28 cents.
For more information please contact Ryan Love on 1300 856 338 or e-mail ryan.love@apexpartners.com.au.
This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.